a. Determine the initial cash flow required by the new press.

b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.)

c. Determine the payback period.

d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press.

e. Make a recommendation to accept or reject the new press, and justify your answer.

a. Determine the initial cash flow required by the new press.

Calculate the initial cash flow will be:(Round to the nearest dollar.)

Installed cost of new press			$
Proceeds from sale of existing press	$
Taxes on sale of existing press	$
Total after-tax proceeds from sale			$
Initial cash flow			$

b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.)

Calculate the periodic cash inflows attributable to the new press below:(Round to the nearest dollar.)

Operating Cash Inflows
Year	1
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	2
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	3
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	4
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	5
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

(Round to the nearest dollar.)

Operating Cash Inflows
Year	6
Revenues	$
Expenses	$
Depreciation	$
Net profits before taxes	$
Taxes	$
Net profits after taxes	$
Operating cash inflows	$

c. Determine the payback period.

The payback period for this project is

nothing

years. (Round to one decimal place.)

d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press.

The net present value is

$nothing.

(Round to the nearest dollar.)The internal rate of return is

nothing%.

(Round to one decimal place.)

e. Make a recommendation to accept or reject the new press, and justify your answer.(Select from the drop-down menus. Round the NPV amount to the nearest dollar. Round the IRR value to one decimal place.)

The NPV is a

negative

positive

$nothing

and the IRR of

nothing%

is well

above

below

the cost of capital of

11.1%.

Based on both decision criteria, the project

should

should not

be accepted.

Enter any number in the edit fields and then continue to the next question.

Integrative: Complete Investment decision Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.28 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $0.91 million 10 years ago, and can be sold currently for $1.14 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.63 million higher than with the existing press, but product costs (excluding depreciation) will represent 54% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACRS E using a five-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 11.1%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) a. Determine the initial cash flow required by the new press. x b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depre Data Table c. Determine the payback period. d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed ne e. Make a recommendation to accept or reject the new press, and justify your answer. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) a. Determine the initial cash flow required by the new press. Rounded Depreciation Percentages by Recovery Year Using MACRS for Calculate the initial cash flow will be: (Round to the nearest dollar.) First Four Property Classes Percentage by recovery year* Installed cost of new press $ Recovery year 3 years 5 years 7 years 10 years Proceeds from sale of existing press $ 1 33% 20% 14% 10% 2 45% 32% 25% 18% Taxes on sale of existing press $ 3 15% 19% 18% 14% Total after-tax proceeds from sale $ 4 7% 12% 12% 12% 5 12% 9% 9% Initial cash flow $ 6 5% 9% 8% 7 9% 7% b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depre 8 4% 6% 9 6% Enter any number in the edit fields and then continue to the next question. 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while Integrative: Complete Investment decision Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.28 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $0.91 million 10 years ago, and can be sold currently for $1.14 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.63 million higher than with the existing press, but product costs (excluding depreciation) will represent 54% of sales. The new press will not affect the firm's net working capital requirements. The new press will be depreciated under MACRS E using a five-year recovery period. The firm is subject to a 40% tax rate. Wells Printing's cost of capital is 11.1%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) a. Determine the initial cash flow required by the new press. x b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depre Data Table c. Determine the payback period. d. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed ne e. Make a recommendation to accept or reject the new press, and justify your answer. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) a. Determine the initial cash flow required by the new press. Rounded Depreciation Percentages by Recovery Year Using MACRS for Calculate the initial cash flow will be: (Round to the nearest dollar.) First Four Property Classes Percentage by recovery year* Installed cost of new press $ Recovery year 3 years 5 years 7 years 10 years Proceeds from sale of existing press $ 1 33% 20% 14% 10% 2 45% 32% 25% 18% Taxes on sale of existing press $ 3 15% 19% 18% 14% Total after-tax proceeds from sale $ 4 7% 12% 12% 12% 5 12% 9% 9% Initial cash flow $ 6 5% 9% 8% 7 9% 7% b. Determine the periodic cash inflows attributable to the new press. (Note: Be sure to consider the depre 8 4% 6% 9 6% Enter any number in the edit fields and then continue to the next question. 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while